CPA Australia

Data management strategies

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On 14th October 2009, I will be presenting at CPA Congress in Melbourne to the topic ‘Data Management Strategies’.  Apparently CPA Australia didn’t like my originally suggested title ‘The devil is in the detail – which is why the Lord of the Nine Hells should never be your DBA’, which I blogged about earlier.  I think the new title is rather bland, don’t you.

The session overview is below:

Micheal Axelsen FCPA Director
Applied Insights Pty Ltd

As accountants, we prepare the information that a business uses to make its important decisions. Sometimes though, the data we use seems to be impossible to track down – and when we do find it, who knows whether it’s actually useful or not?

In this entertaining presentation, Micheal looks at some of the practical pitfalls and case studies of working with data – from rampant spreadsheets to the DBA nightmare – that Micheal has seen, with practical advice you can use to help your business escape its database nightmare.

Anyway, it promises to be fun, although it would have been much more fun if I could have brought theology into the debate of DBAs vs rational people.

Image from Flickr User Lessio. Some Rights Reserved.

The devil is in the detail – which is why the Lord of the Nine Hells should never be your DBA

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Maybe he knows where the bodies are buried...CPA Australia have asked me to present at their conference in Melbourne in October. They didn’t want to do Carbon Pollution Reduction Scheme – that’s already been well-covered apparently. I did suggest that I could relate some case studies from the field about data governance – you know, how to get databases right and so on. I decided that I would try for the entertainment factor – after all, I have seen quite a few fun things in my time, and embellishment never hurt 🙂 – and so I have written an outline for ‘The devil is in the detail – which is why the Lord of the Nine Hells should never be your database administrator’.

Seminar overview:

A successful business knows about its business environment to deliver consistently good services or products to its customers at a reasonable price. Accountants prepare the information that provides the feedback to the business on how it is travelling.

Unfortunately, getting that information right is quite a trick! Some of the information is locked away in limbo; we know it exists but how do we get to it? And no, ‘it’s in the database’ is not really all that helpful. Is the information we rely on actually all that accurate?

In this entertaining presentation, Micheal Axelsen explores the steps and some of the pitfalls you can take to achieve good governance of your data so that the information you prepare for the business is as right as you can get it (and meets compliance requirements!).

On this journey we take a look at some of the practical pitfalls and case studies of working with data that Micheal has seen in fifteen years of working and consulting to industry and commerce, with practical advice you can use to help your business escape its database hell.

Short overview:

As accountants, we prepare the information that a business uses to make its important decisions. Sometimes, though, the data we use seems to be impossible to track down – and when we do find it, who knows whether it’s actually useful or not?

In this entertaining presentation, Micheal looks at some of the practical pitfalls and case studies of working with data – from rampant spreadsheets to the DBA from Hell – that Micheal has seen, with practical advice you can use to help your business escape its database hell.

Does anyone care to leave feedback for me? Would you go to such a session? Or is it trying too hard to try and make databases entertaining… Still, this stuff is what I live for – which is a sad indictment of the times, I suppose, or at least of my sense of humour.

Image from Flickr User Lessio. Some Rights Reserved.

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The implications of NGERS and CPRS on information systems

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Last week I was invited to present to the CPA Australia Carbon Pollution Reduction Scheme Discussion Group as part of the CitySmart Innovation Festival, along with Danny Powers, Michele Chelin, and Andrew Rogers.

It was an informative night and I think the audience appreciated what we did, as usual.  At any rate, I did promise I’d put up my slides; they’re attached below as Slideshare.  If you’d like the originals for your own purposes please feel free to email me.

Presentation

Implications of Emissions Trading Scheme for Information Systems

Points noted in the presentation

  • Compliance with the reporting requirements (National Greenhouse and Energy Reporting Act 2007) means the development or implementation of major information systems.
  • NGERS is independent of the CPRS – and captures more companies than the CPRS.
  • The current proposed delay of one year has some impact on the carbon pricing models, but compliance efforts by NGER reporting entities will need to continue.
  • Reporting entities (entities producing > 125KT in 2008/2009, through to > 50kt CO2 equivalents by 2010/2011) will need to report emissions by one of four methodologies:
    • Method 1: the National Greenhouse Accounts default method
    • Method 2: a facility-specific method using industry sampling and listed Australian or international standards or equivalent for analysing fuels and raw materials
    • Method 3: a facility-specific method using Australian or international standards or equivalent for sampling and analysing fuels and raw materials
    • Method 4: direct monitoring of emission systems, on either a continuous or periodic basis
  • Methods 1-3 are estimates of emissions based upon increasingly accurate emissions factors. Method 4 monitors actual emissions.
  • A single annual emissions report is required by 31 October each year under NGER Act.
  • Information that should be kept – electronically or in paper-based form – includes:
    • a list of all sources monitored
    • the activity data used for calculation of greenhouse gas emissions for each source
    • categorised by process and fuel or material type
    • documentary evidence relating to calculations – e.g. receipts, invoices & payment methods
    • documentation of the methods used for greenhouse gas emissions and energy estimations
    • documents justifying selection of the monitoring methods chosen
    • documentation of the collection process for activity data for a facility and its sources
    • records supporting business decisions, especially for high-risk areas relating to reporting coverage and accuracy.
  • AS ISO 15489 (the Australian and international standard for record management) provides guidance – but not all documents are records!
  • Management of information over the lifecycle is a challenge due to potential changing definitions and criteria
  • Under the CPRS, liable entities whose emissions exceed 125K tonnes per annum (‘Large Emitters’) must have their emissions independently audited. For all other entities under NGERS and the CPRS, they may be subject to audit on suspicion of non-compliance or on a risk-management basis.
  • As report identifies actual CO2 equivalent emissions, and thus the number of permits surrendered, business must ensure its calculation is accurate, and that people understand the report and data they are producing.
  • To support auditable systems, the information systems of liable entities will need to address asset safeguarding, data integrity, system effectiveness and system efficiency concerns.
  • Systems will need to be reliable and timely (“95% confident”) having regard to:
    • Transparency
    • Comparability
    • Accuracy
    • Completeness
  • Extensions or integrations to accounting information systems are likely.
  • There are important factors for a business to address if it is going to create an auditable information system to support its emissions report.
  • 50kt of CO2 emissions is the equivalent of, for example, the operation of 15 data centres with 1000 servers over one year – so, not a small business!
  • As for SME’s, they are less affected from an information systems perspective.
  • Similar concerns exist though for ensuring that the integrity of, for example, price estimation models is accurate (given, for example, electricity cost increases of 18% and gas cost increases of 12%).
  • It is likely that you will need to estimate and select prices based upon a rigorous method, or potentially attract the attention of the ACCC.
  • SME’s that supply liable entities and/or entities that have ‘green’ purchasing policies may especially need to understand the impact of the scheme on their future demand
  • ‘Very Large’ SME’s and large corporations that are currently outside of the CPRS, but could be caught in potential future expansions of the definition, should consider implementing greenhouse gas emissions reporting information systems to inform future lobbying efforts and by way of advance preparation.

CPRS Panel for CPA Australia

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I am a delinquent blogger.  Very, very delinquent.  That isn’t because I haven’t been doing interesting stuff, it is because I have, and although I tweet regularly, I don’t always get around to making another blog post.

So by way of ‘advance notice’, I am just saying’, I am presenting at a panel for CPA Australia next week on the effect of the CPRS (Carbon Pollution Reduction Scheme) on business.  Even though it’s been delayed, the reporting imposte is still going to be there.

Here’s a link to the panel I’m speaking on:

https://www.cpaaustralia.com.au/apps/training/eventdetails.aspx?eventID=5750&eventLocationDateID=18385&sessionID=9917

I’ll post my notes and slides (it’s only 10 minutes) next week, but it promises to be an interesting event.  Some people still argue about the science – for me, that’s as maybe, given that there IS a reporting scheme coming in :).  Eventually.

An introduction to the Carbon Emissions Reporting regime in Australia

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This is a blog post from a CPA Australia Carbon Emissions Reporting Discussion Group meeting – the inaugural meeting – that I attended on 18th November 2008.  Danny Power from PwC is the convenor. 

There will be an election of office-bearers at the end of the next meeting.  The topics under discussion are going to be quite broad-ranging.  Danny is linking it to the sustainability reporting issues, and Danny seems to think the label might change later.  However, Carbon Emissions Reporting is the current label for the group – thinks we might need to break into several discussion groups at some point (I’m not sure about that – see how popular it is).  There were about 40 people in attendance at this first meeting, though, which is always a good sign. 

Why did Danny set up the discussion group?

  • Compliance issues
  • The accountant’s role as a business advisor and in managing the reporting systems
  • Impacts for all organisations whether direct or indirect
  • “The Science” – still seems controversial, and if you’re going to report on it you need a working knowledge of what the processes are and how it works. 
  • Possibly the most important – to create a support and peer group for each other.

Schemes, coverage, compliance and impacts

This section of the presentation was given by Mick Zeljko of the Climate Change Team of PricewaterhouseCoopers. 

The finance function of most companies will be generally involved it seems in managing the reporting process, which is a substantial – very substantial – part of the new CPRS. 
Emissions Schemes

Current programs:

  • Mandatory Renewable Energy Target (MRET)
  • NSW Greenhouse Gas Abatement Scheme (GGAS)
  • Qld Gas Electricity Scheme (GECS)
  • Greenhouse Challenge Plus
  • Energy Efficiency Opportunities

The scope of these current programs is fairly limited and tend to be industry-specific.  There is a general feeling that perhaps people have been a little bit lax about the current programs, and it’s been pretty relaxed with the result that there has not been a lot of accuracy in the numbers that are currently being reported.  Probably a lot of companies don’t really have a lot of confidence in their reporting schemes. 

New Schemes:

  • National Greenhouse and Energy Reporting System (NGERS)
  • Carbon Pollution Reduction Scheme (CPRS)

NGERS will cover a lot less companies than those that are affected by ETS.  Types of gasses – six Kyoto gasses – CO2 and Methane and so on.  All measured in terms of CO2 equivalency – for example, methane is 20 times stronger than CO2, so 1 tonne of emitted methane is 20 CO2 Tonne Equivalents.

The NGERS does get down to 200 terajoules and 50 kilotonnes in 2010.  ETS will require only 25KT in 2010 so it is a little disconnected from NGERS – you can probably expect that the two programs will come into alignment. 

The Emission Trading Scheme (ETS) is now officially called CPRS – Carbon Pollution Reduction Scheme.  The feeling is that it sounds better to be reducing carbon pollution than trading the rights to emit pollution.  The scheme generally caps Australia’s emissions, and then identifies industries subject to the cap.  These industries are then allocated permits and at the end of the year have to have permits to cover what they emitted or pay a substantive fine.  If you don’t have the permits, you have to go buy them from someone who does.  This is the essence of the ‘cap and trade’ system.  

Under the scheme:

  • Government allocates or auctions permits up to the cap annually.
  • Companies compete on the market to acquire required permits.
  • Permits can be traded at market prices between firms and third parties.
  • Scheme requires robust monitoring, reporting and assurance of data.
  • Transitional assistance measures are included
  • A number of elements are yet to be finalised
    • Including emissions target trajectories, penalties for non-compliance and complementary measures for non-covered sectors. 

A green paper was released in July.  Everyone affected is throwing a submission at the government.  The government is aiming to have draft legislation ready by the end of the year.  There remains a whole bunch of stuff that is yet to be finalised, particularly emissions trajectories.  We don’t know what the limits will be yet though – what the targets will be. 

Covered sectors:

  • Stationary energy
  • Industrial processes
  • Fugitive emissions (e.g. mining and landfill)
  • Waste
  • Transport
  • Reforestation (opt-in – gets you credits)
  • Agriculture may come in later, around 2015.

Liability generally relies upon the emitter.  Generally it is upstream supply liability.

Emissions covered include:  Scope 1 (i.e. direct for example emissions from a generator) emissions only.  Contrast with NGERS which includes Scope 2 (e.g. indirect such as a factory’s use of electricity) across all 6 Kyoto Greenhouses. 

Threshold

  • Direct emissions of 25,000 tonnes of CO2e (Carbon Equivalents). 

The affected businesses will need to be collecting up systems, processes and governance to get NGERS into place. 

I wonder what the definition of an entity (i.e. a ‘business’ will be in the covered industry?). 

The first NGERS reporting period has commenced, those these systems etc will need to be in place from the point of view of affected NGERS entities.  CPRS Green Paper submissions are now closed.  The draft legislation is due out in early September, and they seem to want to have the legislation in place by the end of the year.  The Government wants to set medium-term national trajectories soon, and are aiming for a 1 July 2010 start.  These trajectories will affect how many permits are available – they will not determine who is affected by CPRS. 
We in Australia will have two full reporting periods and  given thethen full trading will commence under CPRS.  Unless it doesn’t  current financial crisis. 

Under NGERS – compliance is about registering and reporting.  Penalties apply for corporations and CEOs.

Project Definition

There are a a whole lot of rules and legislation around wh`o effectively owns the emissions.  A big mining site will have a lot of issues just working out what are we reporting on.

Systems Implementation

  • Collect greenhouse and energy data
  • Calculate greenhouse and energy data – there is a measurement determination that tells you how you work out how much CO2 you emit.  There are proxy things in place. 
  • Got to have good storage of records for any audit down the track.

Maybe I have a large IT bent, but I can see that this is going to be a problem for anybody seeking to implement Greenhouse Gas Reporting Systems and implement it through the accounting information system.  Or even if they don’t. 

Clearly it will have an impact upon reporting processes, and who does it – and I suspect this job will often fall to the finance function. 

Reporting

  • Register with GEDO
  • Prepare and submit data using OSCAR.  (See Greenhouse Challenge Plus).
  • There will be a lot of internal reporting as well particularly for companies that are CPRS-liable. 

Governance

  • Need a whole lot of things covering all of this to make sure it keeps ticking along. 

Companies will have to be NGERS compliance at a minimum. 

Assurance – large emitters (>125KT CO2) will require third party assurance of the information prior to submission.  Beyond these core issues we don’t know much around how it is taxed and so on.  The draft legislation hasn’t come out yet.  There are thousands of submissions being put in place.

If you are liable there are serious financial implications and also some compliance costs.  Indirect impacts will result in price increases it seems – which will be the main issue for SME’s. 
Indirect impacts are going to be increasing on just about everyone.  Transport and logistics – may see a complete change in the competitive position between transport for example.  For instance you will need to reconsider where you get your services from e.g. road vs rail.

Need to do a risk assessment now.  Carbon due diligence.  Green paper submissions were a big thing a little while ago.

Strategic Response – can do a lot of stuff now.  There are opportunities for new services and products – carbon market planning and financial advice.

CPRS Accounting Issues:

  • Permits acquired to satisfy obligation = intangibles
  • Permits acquired for trading = inventory
  • Measurement choices available
  • Impact of CPRS on impairment calculations
  • Accounting disclosures which may be required.
  • How to account for forward purchase agreements of carbon pollution permits
  • Broadly – what impact will the acquisition, trading, hedging and surrender of carbon plollution permits on reporting.
  • Tax treatment?  Still yet to be decided. 

We also noted in the presentation that cashflow issues exist potentially for people that have to buy permits up front. 

There will be another meeting in February, probably, of the Discussion Group.  It was a very interesting discussion and it will be interesting to see where these compliance issues around the Carbon Emission Emissions Reporting processes take us.  And as we can see above – there are assurance implications (although supposedly only for >125KT emitters?).

More notices as events warrant.